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E-commerce Fraud: Some Thoughts on Protecting Your Dropshipping Store

by Olga L. Case studies
5.0 rating
May 22, 2017 7 minute read
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Fighting e-commerce fraud

With the kind permission of our clients, we are always happy to share their success stories with the wider audience. It makes us feel good to learn that our customers actually change their life thanks to our solutions. Also, it helps us educate and motivate other people who are going to launch their own dropshipping stores.

But today, we would like to talk about something not that cheerful. There is a case of e-commerce fraud that one of our clients witnessed from his own buyer, and we think it is worth discussing.

Why would we do that?

E-commerce fraud and its meaning for dropshipping business

Fighting e-commerce fraud

Unfortunately, different types of online shopping fraud is quite a common thing nowadays.

It is so widespread we even talked about it when we described our own journey to successful dropshipping business. As for our experience, it is common for criminals to use stolen credit cards while making a purchase in online stores. We have dealt with it numerous times, and we just know it happens.

It’s not much of a problem, though: it only means that we need to be always sure we’re ready to stand against criminals. And of course we want our customers to be aware of such events: when you know how to deal with this type of crime, you will operate calmly, quickly and professionally if something bad happens.

So, let’s get back to our story.

Success stolen: dropshipping store owner witnesses crime

Fighting e-commerce fraud

Stuart is our customer who first contacted us about half a year ago. First, he only purchased AliDropship plugin to use it on his own website. But later on, he got so enthusiastic about its performance he additionally ordered a custom store.

The reason is, Stuart got really inspired with the offered dropshipping format, and he also found the results to be highly satisfying. He started working in a nice niche, and was waiting for his first orders to come.

On March 7th, 2017, Stuart received an order for £297 and got really excited about it since it only was his second order from the moment he launched this business.

Two weeks later, the very same client ordered from him again. This time he placed an order for £294, which also became a pleasant surprise for Stuart.

And 4 days later, this exact client came to Stuart’s store again! He spent £322 on his purchase.

This way, less than in 3 weeks Stuart achieved an incredible volume of sales – almost £1000 from a single buyer only! It gave him about £300 in profit.

But in a few weeks it became obvious that the customer is actually a cheater.

Stuart got a notification from Stripe and learned that the client had disputed his first order for £297. Apparently, the client said he didn’t buy anything, and asked to return his money. As the result, Stripe took the necessary amount of money from Stuart’s bank account to refund this order.

Stuart, in turn, started negotiating with Stripe: he submitted evidence proving that the order was paid, and the package was delivered to the client. Still, the client’s bank insisted that there needs to be an investigation, so the decision about the money will only be made in June.

And then Stuart lost money again: several days ago he got a notification from Stripe saying that the second order for £294 is now also disputed! It means that Stuart will overall lose almost £600 in a blink of an eye. Surely enough, he provided the proof for this purchase as well, but he will have to wait for a long time to get a final decision from the bank and (hopefully) return his money.

How can dropshipping store owner prevent e-commerce fraud?

Fighting e-commerce fraud

To Stuart’s credit, he reacted on this situation promptly and professionally. He provided Stripe with all the possible data to prove there was a real transaction, and it lets us hope for a favorable outcome of this horrible situation.

We should note that it is much easier to prevent online shopping fraud than to deal with it when it has already happened. That’s why, while accepting an order, you need to be really careful if:

  • A first-time buyer comes to your store and places a huge order that is much bigger than your average;
  • A buyer chooses more expensive and quicker delivery method;
  • A buyer repeatedly returns to you store a short period of time and makes multiple orders, or buys the same product in a large quantity.

All these actions are typical for a criminal who uses a stolen credit card. The goal is to spend all the money from this card as quickly as possible before its period of validity ends.

We have already discussed the alarming signs of payment that include:

  • A use of credit cards that are registered upon someone else’s name and country (these details don’t match your buyer’s personal info);
  • A use of multiple credit cards by the same buyer;
  • Multiple payment denials.

These are really suspicious signs, so if you witness them, you need to:

  • Not hurry with processing the order;
  • Wait until your payment system checks and approves the payment;
  • Ask the buyer to provide their ID and photo of their credit card.

Oh! And a common recommendation in case something goes wrong – DON’T IMMEDIATELY SPEND ALL THE PROFIT. It is wise to save up some money and keep a fund. If for some reason finances will be taken from your bank account as a refund to criminal, at least you won’t be left empty-handed.

As we already mentioned, we face the problem of e-commerce fraud now and then, but we learned how to fight it efficiently. When we see a first-time buyer who places a huge order and tries to pay with a credit card that was issued in a country different from his own, it’s worrying. This is why we stop such orders from proceeding, and ask the buyer to send us their photo that shows the face, the ID and the credit card itself. If there is no answer in 24 hours, we just cancel the order and forget about it.

We hope none of this will ever happen to you, but if you already have a similar story, feel free to share it in our comments section below. Remember that your experience is a valuable lesson for your fellow entrepreneurs, and we all can learn from each other.

Stay cautious, stay alert, and stay safe!

By Olga L.
Olga is a content creator at AliDropship, and she aims to explain the most complicated drop shipping concepts in the simplest terms possible.
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4 Comments
Mahamoodally Sheik Mohamud Ibrahim August 2, 2017 10:41:04

Hello! Good day to you all! I am from the Island of Mauritius and after reading the case of possible fraud and unsafe payments by unknown first time customers, i would like to know if under such circumstances if our banker can filter and protects us via the banking security anti fraud system if any such Banking tools exists. And only allows dispatch the order when the payment is found to be reliable. In other words we will dispatch the order only when the Bank gives us the Green Light. Hope i am cleared and excuse me for my English if i have not expressed myself clearly….thank you!

Tony November 8, 2017 17:37:52

99% of people wont send share there id or photo of creditcard. just make sure to send to the same billing address and that’s its a confirmed address. and they will protect you.

Partshub Canada February 6, 2018 18:54:18

We got hit hard in the month of December 2017, over $10,000 in charge backs, we thought we were covered by our payment processor… We have proof of delivery and still wont give us our money back. Most purchases were over $1000 that came back fraud. Now we ask for photo ID and copy of CC on all over over $999 or anything that looks suspicious. It sucks because we feel like the bad guys when orders are legit, but we cant afford to lose 10k a month.

oray March 12, 2018 9:37:08

hi .. If id information is not sent, are you returning the fee to the card?

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